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Uber Drivers: Employees or Independent Contractors?

DISCLAIMER: THE FOLLOWING INFORMATION IS NOT INTENDED TO BE LEGAL ADVICE AND IS NOT GUARANTEED TO BE CORRECT, COMPLETE OR UP-TO-DATE. THEREFORE, IF YOU NEED LEGAL ADVICE, YOU SHOULD CONSULT A LICENSED ATTORNEY IN YOUR AREA .

Introduction

The taxi-hailing application Uber has, as a result of its immense popularity with users, expanded in well over 270 cities since its launch 6 years ago.[1] The company operates a marketplace through which customers and local drivers are paired. As part of its business model, Uber classifies the drivers as independent contracts and by virtue of this classification, the Uber drivers must pay expenses out of their own pockets, receive no guaranteed hour wages or a salary and they receive no employee benefits.[2] In addition, Uber is thereby not subject to the Canadian withholding, remitting and reporting requirements as well as social security taxes that companies that hire employees must pay.

Issue

1) Are Uber drivers employees or independent contractors?

Uber drivers likely are employees because the nature of their work and duties evidences a finding that there was an employment relationship between the parties. The primary test to determine the existence of this relationship is whether the worker is performing services “as a person in business on his own account”.[3] This is ascertained by looking at a two-step approach that firstly considers the subjective intent of the worker and the company that engages his services and secondly, examines whether the subjective intent of the parties is sustained by an objective reality.[4]

Analysis

Subjective intent of the parties

Uber and its drivers likely intended that the drivers perform the service of transporting clients on their own account as independent contractors. This can be seen be seen from either the contractual relationship the parties have entered into or by looking at the conduct of the parties; the presence of invoices and registration for tax purposes can be helpful indicia.[5]

The contract between Uber and the driver stipulates that “[t]hrough its license of the mobile application…, [Uber] provides a platform for Users to connect with independent transportation providers.”[6] Moreover several other contractual clauses could support the notion that the drivers were providing their services as independent contractors, namely a provision granting the drivers the discretion to accept transportation requests[7]; and moreover clause 2 of Uber’s Terms and Condition (T&C) states that the drivers acknowledge that they are not employed by Uber.[8] The drivers must accept the T&C drafted by Uber prior to gaining access to the platform, so it is likely that the intention of the workers was to act as independent contractors.

A further determination could be made by looking at whether the drivers reported their income as independent contractors. Based on the foregoing, the parties likely intended for the drivers to be considered as independent contractors.

Whether the intention of the parties is sustained by an objective reality

The stated intention of the parties to treat the drivers as independent contractors is likely not sustained by reality. This inquiry involves consideration of the factors set out in Wiebe Door, namely “the level of control over the worker’s activities, whether the worker provides his own equipment, hires his helpers, managers and assumes financial risk, and has an opportunity of profit in the performance of his tasks.”[9]

In this case, Uber exercised a significant level of control over the drivers with respect to how duties had to be accomplished. The drivers are obligated to maintain a properly registered and licensed vehicle no more than 10 years old and in good operating condition.[10] Furthermore, the vehicle’s cleanliness must be maintained while providing transportation to customers.[11] The task of providing transportation to customers must be done with professionalism, courtesy and care.[12] A failure to do adhere to the terms of the Uber agreement may result in a driver losing access to the platform.[13] Nevertheless, the drivers have the flexibility to choose their own hours.[14] Moreover in carrying out their tasks the drivers are required to provide their own vehicles and additionally are responsible for defraying their operational costs themselves out of their own pockets.[15] However in some instances, Uber has given drivers an iPhone so that they could access the application in return for a refundable deposit.[16]

Furthermore, the T&C state that drivers may not share their login information with anyone, thereby limiting their ability to hire helpers.[17] The drivers are bound to assume their won financial risks and losses to the extent that income they earn from the application is contingent on their own efforts; notwithstanding this, Uber’s T&C will grant the drivers an indemnity whenever customers fail to appear at a pick-up location[18] and may also do so to compensate drivers for unbuzy days.[19]

Finally the chance drivers have to realize a profit in the performance of their tasks is limited by Uber. Their remuneration is set at a fixed rate by the company and additionally, the company precluded them from accepting tips from customers.[20] The drivers in spite of this could nevertheless adjust their pay by working as much as they desire.

The aforementioned factors are indicative of a relationship that features elements from both a contract of services and a contract for services. By considering the whole scheme of the operation, the legal operation between parties would likely be defined as employer and employee, thereby controverting the intent of the parties.

Conclusion

The drivers likely are employed by Uber. Despite contractual provisions to the effect that the drivers would be classified as independent contractors, this intent does not seem to be sustained by the objective reality of the relationship between the parties, which indicated that the drivers were actually employees. In sum, it would appear that the drivers and Uber had an employee-employer relationship.